Reference no: EM133136377

HRM Case Study: Downsizing

As the largest in Ouachita, Arkansas, International Forest Products Company (IFP) is an important part of the local economy. Ouachita County is a mostly rural area in south central Arkansas. It employs almost 10percent of the local workforce, and few alternative job opportunities are available in the area.

Scott Wheeler, the human resource director at IFP, tells of a difficult decision he once had to make. According to Scott, everything was going along pretty well despite the economic recession, but he knew that sooner or later the company would be affected. "I got the word at a private meeting with the president, Janet Deason, that we would have to cut the workforce by 30 percent on a crash basis. I was to get back to her within a week with a suggested plan. I knew that my plan would not be the final one, since the move was so major, but I knew that Ms. Deason was depending on me to provide at least a workable approach.

"First, I thought about how the union would react. Certainly, workers would have to be let go in order of seniority. The union would try to protect as many jobs as possible. I also know that all of management's actions during this period would be intensely scrutinized. We had to make sure that we had our act together.

"Then there was the impact on the surrounding community to consider. The economy of Ouachita County had not been in good shape recently. Aside from the influence on the individual workers who were laid off, I knew that our cutbacks would further depress the area's economy. I knew that there would be a number of government officials and civic leaders who would want to know how we were trying to minimize the harm done to the public in the area.

"We really had no choice but to make the cuts, I believed. First of all, I had no choice because Ms. Deason said we were going to do it. Also, I had recently read a news account that one of our competitors, John Manville Corporation in West Monroe, Louisiana, had laid off several hundred workers in a cost-cutting move. To keep our sales from being further depressed, we had to ensure that our costs were just as low as those of our competitors. The wood products market is very competitive and cost advantage of even 2 or 3 percent would allow competitors to take many of our customers.

"Finally, a major reason for the cutbacks was to protect the interests of our shareholders. A few years ago a shareholder group disrupted our annual meeting to insist that IFP make certain antipollution changes. In general, though, the shareholders seem to be more concerned with the return on their investments than with social responsibility. At our meeting, the president reminded me that, just like every other manager in the company, I should place the shareholders' interests above all else. I really was quite overwhelmed as I began to work up a human resource plan that would balance all these conflicting interests."

Questions:

1. List the elements in the company's environment that will affect Scott's suggested plan. How legitimate is the interest of each of these?

2. Is it true that Scott should be concerned first and foremost with protecting the interests of the shareholders? Discuss